“Our approach to investing flows from a single, bedrock principle: the future is unpredictable and uncertain. Indeed – and this is actually quite interesting – even having knowledge of the future doesn’t provide actionable insight as to how markets will behave given that future.”
So begins our book, Thinking About Investing: Two Decades of Reflective Commentary on Markets and Money.
Each of the book’s ten chapters represents a core investing principle and features a selection of commentary previously shared through our newsletters since the firm’s founding in October 2003.
The opening selection, written in February 2014 by our late cofounder Victor Levinson, supports our bedrock principle. It is as relevant today as it was then:
The financial media and most professional investment organizations (advisory firms, brokerage firms, mutual funds) spend a great deal of time and effort providing their views of the future, either related to the general economy, the prospects of specific companies, or the movement of market prices.
And many in the investing public want to believe that someone out there knows what is going to happen. Unfortunately, the markets prove over and over that they cannot be predicted in advance, frustrating professionals and amateurs alike.
Over the years we have discussed this viewpoint many times. But most people remain skeptical, continually asking the same basic question, even though the terminology of the questions is ever-changing.
The question they want answered is: What is the market likely to do over the next “fill-in-the-blank” time period?
And when we answer that we simply do not know – and what is more, that no one knows, and to think that anyone knows can be a real disservice to a person’s financial well-being – there is always lingering doubt on the part of the questioner.
However, we think we are only stating the obvious: that no one can predict the future and that future stock prices, bond prices, interest rates, or economic growth rates are all subject to unpredictable future events.
Financial media and financial organizations wanting you to believe that someone knows the future is of course in their interest, so you will buy their reports, or research, or investment products, but unfortunately these efforts are all, in our view, an exercise in futility.